Law And Health Care Research Paper

1. Law And Health Care: Framing The Issues

It should not be surprising that two of the USA’s most important institutions, the legal and health care systems, are intertwined and intersect at various points. Since the early 1800s, medical jurisprudence, where physicians are called as expert witnesses and where the courts act to regulate the quality of medical care, has been an integral part of the growth of the health care enterprise. As Mohr noted, ‘… medical jurisprudence … figured prominently in early American medical history …; neither subject can be fully understood in its modern context without taking the history of legal medicine into account’ (Mohr 1993, p. 251). As this quote indicates, the involvement of the courts in health care delivery is not new. Yet the relationship between law and health care has never been more visible or manifest than it is today.

Despite the inevitable ebbs and flows of the relationship between law and medicine, it is arguable that the relationship was essentially stable from the mid-nineteenth century until the mid-1960s (Stryker 1932). As recently as the late 1960s and early 1970s, health care attorneys and health care executives had a relatively easy set of legal rules to live with. Both sides could predict the nature and scope of the litigation since the essential rules establishing the standard of care and the types of litigation initiated varied little during this period. A typical court case involved one patient suing one physician, guided by liability rules that reflected judicial deference to physicians in setting the standard of care. That relative stability was largely shattered by the advent of managed care. At both the state and Federal levels, all three branches of the legal system, the legislatures, regulatory agencies, and courts, have persistently been involved in setting health care policy and monitoring health care delivery since the mid-1960s. The framing of the legal issues in the managed care era thus reflects the dramatic changes engulfing the health care system since the mid-1980s and the resulting policy conflicts that have emerged.

1.1 The Litigation Context

For many years, courts have actively monitored quality of care through determining the standard of care for medical liability (Jacobson 1989, Furrow 1997) and interpreting contractual definitions of medical necessity (Eddy 1996, Hall and Anderson 1992). Courts have also been called upon to interpret the vast array of state and federal legislation regulating health care delivery.

In responding to litigation challenging managed care cost containment practices, judges face a threshold question of what role courts should play in monitoring the managed care environment relative to legislatures. Courts face the tension of applying common law liability principles to new situations (perhaps by depicting public policy considerations) or deferring to elected representatives to set public policy. In the new health care environment, courts will be asked to distinguish the economic aspects of managed care that order relationships between health plans, physicians, and patients, from the incentives that contribute to below-standard care. The former are more traditionally legislative prerogatives while the latter are traditionally within the judicial purview. For those cases resolved in the courts, judges will need to decide whether they should be resolved by contract or tort (civil wrongs such as negligence) law. The difference is that recovery under contract is more difficult and damage awards are lower. What complicates matters is that in managed care, the insurance (i.e., contract) and medical care (i.e., potential negligence) are combined in one entity.

1.2 Liability

Common law liability doctrine has traditionally emerged incrementally to adapt to changing circumstances. Thus, it will take some time before the actual contours of liability can be assessed. Nevertheless, certain themes have emerged in the litigation so far.

Despite variation in the state cases decided to date, the direction appears to be that courts are applying traditional liability doctrine to the new organizational forms, including health maintenance organizations (HMOs), independent practice associations (IPAs), and preferred provider organizations (PPOs) (Furrow 1997). For staff or group model HMOs, the law had already developed holding them liable for torts (civil wrongs) committed by their employees. The primary issue is whether courts will apply indirect liability doctrine (i.e., vicarious liability and agency principles) to the other MCO organizational forms for malpractice committed by an independent physician.

In determining vicarious liability, the courts look to the MCO’s control over the physician or how the plan markets its physicians. The greater the indications of control and the more the plan markets the quality of its physician panel, the greater the likelihood that the MCO will be held vicariously liable. In the leading case of Boyd . Albert Einstein Medical Center, 547 A.2d 1229 (Pa. Super. 1988), for example, the court held that an IPA could be found liable for an individual physician’s medical malpractice because the patient reasonably believed that the IPA controlled the physician. The court rejected the plan’s argument that it was not liable because the physician was an independent contractor, holding that the physician could still be the plan’s agent with respect to the patient. A key element is whether the MCO has sufficient control, such as through utilization management arrangements, to override a physician’s clinical decision.

1.3 Challenges To Cost Containment Practices

The changes in the health care environment have inevitably resulted in a new set of issues to be litigated, particularly the conflict between population-based cost containment and access for individual subscribers (sometimes to experimental procedures), the multiplicity of actors in a given case, and the evolving nature of the organizational structures. Just as the courts had to adapt medical liability principles to the emergence of hospitals as central to health care delivery in the 1960s, the same process is now underway with regard to the emerging organizational forms comprising managed care. There is inevitably a learning curve as courts become educated about the underlying changes and begin to adopt principles derived for a different model to the new arrangements (Jacobson and Pomfret 1999). For example, instead of the simple model of litigation involving one physician and one patient, managed care litigation may include the patient, the physician, the health plan, the utilization review firm, and the administrator of an ERISA-covered plan. Sorting out which party is legally responsible for delayed or denied care and the acceptable level of care resulting from cost containment strategies remains a work in progress.

Nonetheless, the cases decided so far suggest that courts are not systematically impeding the implementation of cost containment initiatives (Jacobson 1999). While it may be that many of the most challenging cost containment innovations have yet to be litigated, courts seem willing to uphold cost containment programs, except, perhaps, if such programs are seen as limiting access to life-sustaining treatment. For example, courts have generally rejected challenges to financial incentives (though some courts have allowed such challenges to proceed to trial), utilization management programs, and many contractual challenges to benefit denials.

Few courts seem willing to usurp legislative choices in formulating health policy or to obstruct the market in organizing and delivering health care services, with several courts specifically deflecting allegations that managed care incentives violate public policy to the legislatures. One reason for this is that courts have interpreted the Employee Retirement Income Security Act (ERISA) narrowly to block state court challenges to cost containment programs that deny benefit coverage. Another reason why cost containment initiatives have not been overturned is that courts are looking to contract law to determine the extent of the parties’ obligations and responsibilities, especially in physicians’ litigation against MCOs. Though the trend toward contract is neither unlimited nor uniform, it represents a potentially profound shift from the early 1970s, where courts were perceived as protectors of individuals, to courts as deferring to market-based changes.

1.4 Physician Autonomy

The initial litigation trends suggest that courts will not subordinate cost containment programs to physician autonomy. Courts are ruling that people who are dissatisfied with managed care, including physicians, should take their case to the legislatures. This represents a dramatic departure from the era when courts deferred to physician dominance.

It would be understandable if physicians expected that courts would protect the physician–patient relationship from interference by managed care plans. After all, the essence of the health care system lies with the physician–patient relationship, and courts have protected physician dominance in the past (Kapp

1985, Hall 1988). But courts have not done so in the managed care era. To the extent that physicians have been able to secure some gains through the courts, it has largely been through fair process protections and retaining the often-maligned legal standard of care.

The question is why courts are not deferring to physicians; what has changed over the past decade or so to cause the courts’ shift from protecting physician dominance to reinforcing managed care’s dominance? At this point, the answer is somewhat speculative because of the limited number of cases. One potential answer is that courts respond to changes in the underlying environment. As the nature of health care delivery has changed, it stands to reason that courts would begin to look at and incorporate those changes. Slowly but surely, courts are internalizing cost containment goals in developing legal doctrine, rather than ensuring the primacy of the physician–patient relationship. Since the dominant force in health care is institutional, it is not surprising that the legal dominance physicians maintained is now waning.

2. Future Directions And Challenges

During the next few years, the legal system faces four key challenges regarding health care: (a) how to allocate liability given the multiplicity of decision makers involved in managed care; (b) how to balance between the health care needs of individual patients and the cost containment goals of the health care system; (c) how to deal with the consequences of ERISA pre-emption, which now prevents state courts from resolving challenges to how cost containment goals are implemented; and (d) how can conflicting social policy goals (i.e., the cost quality access tradeoffs) be reconciled.

2.1 Allocation Of Liability And ERISA Pre-Emption

The allocation of liability and ERISA pre-emption issues are both about imposing accountability on a system that has managed to shift legal accountability to physicians while maintaining the fiction of noncontrol. Either voluntarily or through legislation, MCOs should be held accountable for their actions.

2.2 Balancing

There is no easy solution to balancing the individual patient’s access to health care with conserving the plan’s assets for the entire patient population. One approach might be to articulate a set of fiduciary obligations that a plan must adhere to in balancing the two. The burden would be on the plan to justify denial of care to the individual patient by a preponderance of the scientific evidence and to demonstrate that the individual’s medical care is not being subordinated to the patient population (Jacobson and Cahill 2000).

2.3 Social Policy Conflicts

The plethora of legislation has placed health care executives in somewhat of a bind. Some regulations, such as fraud and abuse, are specifically designed to reduce health care costs. Others, such as EMTALA, are designed to improve access regardless of cost. Taken alone, each individual law is defensible. Taken together, however, the social policy goals of cost containment, improving access to health care, and improving quality of care conflict across statutes and regulations. Complying with all of the laws may be impossible, and may reflect incoherent social policy.

3. Implications For Other Countries

While other countries may not, for domestic social policy reasons, want to follow the managed care model, it seems likely that most countries will face the need to impose cost constraints on their national health care systems. These choices are already evident in the British and Canadian systems. What this brief survey of US health law trends suggests is that reconciling cost containment with various institutional objectives and interests will take careful planning to ensure that the changes are implemented fairly and equitably.

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